Good day everyone, welcome to the Prospect Capital Corporation first fiscal quarter earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone, and to withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Chairman and CEO, John Barry. Please go ahead.
Thank you, William. Joining me on the call today are Grier Eliasek, our President and Chief Operating Officer, and Kristin Van Dask, our Chief Financial Officer. Kristin?
Thanks, John. This call is the property of Prospect Capital Corporation. Unauthorized use is prohibited. This call contains forward-looking statements within the meaning of the securities laws that are intended to be subject to safe harbor protections. Actual outcomes and results could differ materially from those forecasts due to the impact of many factors. We do not undertake to update our forward-looking statements unless required by law. For additional disclosure, see our earnings press release, our 10-Q, and our corporate presentation filed previously and available on the investor relations tab on our website, prospectstreet.com. I'll turn the call back over to John.
Thank you, Kristin. For the September 2018 quarter, our net investment income, or NII, was $85.2 million, or $0.23 per share, up $0.01 from the prior quarter and exceeding our current dividend rate of $0.18 per share by $0.05. NII increased due to higher dividend income. In the September 2018 quarter, our net debt-to-equity ratio was 75.1%, up 3.5% from the prior year. Our net income for the quarter was $83.8 million, or $0.23 per share, down $0.08 from the prior quarter. We are announcing monthly cash distributions to shareholders of $0.06 per share for each of November, December, and January, representing 126 consecutive shareholder distributions. We plan on announcing our next series of shareholder distributions in February.
Since our IPO nearly 15 years ago, through our January 2019 distribution at our current share count, we will have paid out $16.98 per share to original shareholders, exceeding $2.7 billion in cumulative distributions to all shareholders. Our NAV stood at $9.39 per share in September 2018, up $0.04 from the prior quarter. Our balance sheet as of September 2018 comprised 87.8% floating rate interest-earning assets and 85% fixed rate liabilities, positioning us to benefit from rate increases. Our percentage of total investment income from interest income was 88.4% in the September 2018 quarter, a decrease of 3.4% from the prior quarter as we increased our quarterly dividend income from NPRC and other controlled investments while continuing to focus on recurring income compared to one-time structuring fees.
We believe there is no greater alignment between management and shareholders than for management to purchase a significant amount of stock, particularly when management has purchased stock on the same basis as other shareholders in the open market. Prospect Management is the largest shareholder in Prospect and has never sold a single share. Management and affiliates on a combined basis have purchased at cost over $350 million of stock in Prospect. Our management team has been in the investment business for decades, with experience handling both challenges and opportunities provided by dynamic economic and interest rate cycles. We have learned when it is more productive to reduce risk than to reach for yield, and the current environment is one of those time periods. At the same time, we believe the future will provide us with substantial opportunities to purchase attractive assets utilizing the dry powder we have built and reserved.
Thank you. I will now turn the call over to Grier.
Thanks, John. Our scale business with over 6 billion of assets and undrawn credit continues to deliver solid performance. Our experienced team consists of approximately 100 professionals, representing one of the largest middle market credit groups in the industry. With our scale, longevity, experience, and deep bench, we continue to focus on a diversified investment strategy that covers third-party private equity sponsor-related and direct non-sponsor lending, Prospect sponsored operating and financial buyouts, structured credit, real estate yield investing, and online lending. As of September 2018, our controlled investments at fair value stood at 41.9% of our portfolio, down 0.1% from the prior quarter. This diversity allows us to source a broad range and high volume of opportunities, then select in a disciplined bottoms-up manner the opportunities we deem to be the most attractive on a risk-adjusted basis.
Our team typically evaluates thousands of opportunities annually and invests in a disciplined manner in a low single-digit percentage of such opportunities. Our non-bank structure gives us the flexibility to invest in multiple levels of the corporate capital stack with a preference for secured lending and senior loans. As of September 2018, our portfolio at fair value comprised 44.4% secured first lien, up 0.5% from the prior quarter. 21.7% secured second lien down 0.4% from the prior quarter. 16.3% structured credit with underlying secured first lien collateral, 0.5% unsecured debt, and 17.1% equity investments, resulting in 82% of our investments being assets with underlying secured debt benefiting from borrower pledge collateral. Prospect's approach is one that generates attractive risk-adjusted yields. Our debt investments were generating an annualized yield of 13.5% as of September 2018, up 0.5% from the prior quarter and the fourth straight quarterly increase.
We also hold equity positions in certain investments that can act as yield enhancers or capital gains contributors as such positions generate distributions. We've continued to prioritize senior and secure debt with our originations to protect against downside risk while still achieving above-market yields through credit selection discipline and a differentiated origination approach. As of September 2018, we held 137 portfolio companies, up two from the prior quarter with a fair value of $5.94 billion. We also continue to invest in a diversified fashion across many different portfolio company industries with no significant industry concentration. The largest is 14.1%. As of September 2018, our asset concentration in the energy industry stood at 3.2%, and our concentration in the retail industry stood at 0%. Non-accruals as a percentage of total assets stood at approximately 2.4% in September, down 0.1% from the prior quarter.
Our weighted average portfolio net leverage stood at 4.58 times EBITDA, down from 4.60 the prior quarter and the second straight quarterly decrease. Our weighted average EBITDA per portfolio company stood at $56.5 million in September, up from $55.4 million the prior quarter. The largest segment of our portfolio consists of sole-agented and self-originated middle-market loans. In recent years, we've perceived the risk-adjusted reward to be higher for agented, self-originated, and anchor investor opportunities compared to the non-anchor, broadly syndicated market, causing us to prioritize our proactive sourcing efforts. Our differentiated call center initiative continues to drive proprietary deal flow for our business. Originations in the September quarter aggregated $255 million. We also experienced $55 million of repayments and exits as a validation of our capital preservation objective, resulting on a rounded basis in net originations of $199 million.
During the September quarter, our originations comprised 64% agented sponsor debt, 21% non-agented debt, including early look anchoring and club investments, 9% structured credit, 4% real estate, and 2% corporate yield buyouts. To date, we've made multiple investments in the real estate arena through our private REIT strategy, largely focused on multi-family stabilized yield acquisitions with attractive 10-plus year financing. NPRC, our private REIT, has a real estate portfolio that has benefited from rising rents, strong occupancies, high returning value-added renovation programs, and attractive financing recapitalizations, resulting in an increase in cash yields as a validation of this income growth business alongside our corporate credit businesses. NPRC has exited completely certain properties, including Vista, Abington, Bexley, Mission Gate, Hillcrest, Central Park, St. Marys, Matthews, and Amberley, with an objective to redeploy capital into new property acquisitions, including with repeat property manager relationships.
We expect both recapitalizations and exits to continue. Our structured credit business has delivered attractive cash yields, demonstrating the benefits of pursuing majority stakes, working with world-class management teams, providing strong collateral underwriting through primary issuance, and focusing on attractive risk-adjusted opportunities. As of September, we held $965 million across 46 non-recourse structured credit investments, primarily in the subordinated tranche. The underlying structured credit portfolios comprised over 1,900 loans and a total asset base of over $19 billion. As of September, our structured credit portfolio experienced a trailing 12-month default rate of 113 basis points, down two basis points from the prior quarter, and 68 basis points less than the broadly syndicated market default rate of 181 basis points.
In the September quarter, this portfolio generated an annualized cash yield of 14.3%, excluding recently reset deals with short-term yield compression, and a GAAP yield of 14.4%, down 0.1% from the prior quarter. Cash yield includes all cash distributions from an investment, while GAAP yield subtracts out amortization of cost basis. As of September 2018, our existing structured credit portfolio has generated over $1.19 billion in cumulative cash distributions to us, representing around 78% of our original investment. Through September, we've also exited 11 investments totaling just under $300 million, with an average realized IRR of 16.1% and cash-on-cash multiple of 1.48 times. Our structured credit portfolio consists entirely of majority-owned positions where we hold the subordinated tranche. Such positions can enjoy significant benefits compared to minority holdings in the same tranche. In many cases, we receive fee rebates because of our majority position.
As the majority holder, we control the ability to call a transaction in our sole discretion in the future, and we believe such options add substantial value to our portfolio. We have the option of waiting years to call a transaction in an optimal fashion rather than when loan asset valuations might be temporarily low. We, as a majority investor, can refinance liabilities on more advantageous terms, remove bond baskets in exchange for better terms from debt investors in the deal, and extend or reset the investment period to enhance value. We've completed 24 refinancings and resets since September 2017. Our structured credit equity portfolio has paid us an average 19.5% cash yield in the 12 months ended September 2018, excluding recently reset deals with short-term yield compression.
So far, in the current December 2018 quarter, we've booked $87 million in originations and received repayments of $45 million, resulting in net originations on around a basis of $43 million. Our originations have comprised 83% non-agented debt, 10% structured credit, 6% agented sponsored debt, and 2% real estate. Thank you. I'll now turn the call over to Kristin.
Thanks, Grier. We believe our prudent leverage, diversified access to matched book funding, substantial majority of unencumbered assets, and weighting toward unsecured fixed-rate debt demonstrate both balance sheet strengths as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of fixed-rate liabilities extending 25 years into the future, while the significant majority of our loans float with LIBOR, providing potential upside to shareholders as interest rates rise. We are a leader and innovator in our marketplace. We were the first company in our industry to issue a convertible bond, develop a notes program, issue an institutional bond, acquire another BDC, and many other lists of firsts. Shareholders and unsecured creditors alike should appreciate the thoughtful approach differentiated in our industry, which we have taken toward construction of the right-hand side of our balance sheet.
As of September 2018, we held approximately $4.7 billion of our assets as unencumbered assets, representing approximately 75% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, where we recently completed an extension of our revolver by 5.7 years, reducing the interest rate on drawn amounts to one-month LIBOR plus 220 basis points. We currently have $830 million of commitments from 21 banks with a $1.5 billion total size accordion feature at our option. We are targeting adding more commitments from additional lenders. The facility revolves until March 2022, followed by two years of amortization with interest distributions continuing to be allowed to us.
Outside of our revolver and benefiting from our unencumbered assets, we've issued at Prospect Capital Corporation, including recently multiple types of investment-grade unsecured debt, including convertible bonds, institutional bonds, baby bonds, and program notes. All of these types of unsecured debt have no financial commitments, no asset restrictions, and no cross defaults with our revolver. We enjoy an investment grade BBB rating from Kroll, an investment grade BBB rating from Egan-Jones, and an investment grade BBB- rating from S&P. We've now tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 25 years. Our debt maturities extend through 2043. With so many banks and debt investors across so many debt tranches, we've substantially reduced our counterparty risk over the years.
In the September 2018 quarter, we repurchased $154 million of our July 2019 notes, as well as $29 million of our program notes. We also issued $100 million of 2024 institutional notes, $26 million of baby bonds through our ATM program, and continued weekly prep intern notes issuances. If the need should arise to decrease our leverage ratio, we believe we could slow origination and allow repayments and exits to come in during the ordinary course, as we demonstrated in the first half of calendar year 2016 during market volatility. We now have seven separate unsecured debt issuances aggregating $1.5 billion, not including our program notes, with maturities extending until June 2028. As of September 2018, we had $769 million of program notes outstanding with staggered maturities through October 2043. I'll turn the call back over to John.
Thank you, Kristin. We can now answer any questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause for a moment to assemble our roster. Today's first questioner will be Leslie Vandergrift with Raymond James. Please go ahead with your question.
Hi. Good morning. Thank you for taking my questions.
Hi, Leslie.
Dividend income this quarter was really healthy, $11 million from the private REIT and three and a half from Valley Electric. Going forward, is that a run rate, or how much of that is sustainable?
Well, Leslie, as you know, dividends from any operating company are less predictable than interest income, which is contractually set. I would say it's less predictable. We would not be taking these dividends now unless we thought the companies were healthy enough to continue them. Grier?
Sure. To add that on an expectation basis, we've seen a substantial uptick in performance in both of those businesses, Valley and NPRC. NPRC obviously is a substantially larger operation for us. We would expect for Valley that dividend to continue at least in the current quarter. 2019 is looking quite promising as well, given the growing backlog nature of that business. With NPRC, we currently expect these distributions to continue not only for the current quarter but into each calendar quarter of 2019 as well. We'll see about beyond that. We've had significant success with our value-add renovation program, and it delivered realized IRRs on a growing number of assets in excess of 20%. We have multiple transactions under purchase agreement that are in closing mode right now.
Three more, to be exact, beyond the ones that articulated in each case with nonrefundable deposits and well on their way towards closing. I suspect two of those will close in the current quarter and another transaction in early 2019. We're always optimizing the book. In addition to purchasing and making new investments, we're looking at exiting increasingly just through an outright sale. Though we have recapped deals, and we've examined refinancing options as well. We're quite pleased with not only the historical performance of a real estate book but also the outlook and the pipeline of exits. At the same time, we're replenishing those with new originations. I think on a trailing 12-month basis, our new originations are almost identical to our exits that have been well in excess of two times cash- on- cash multiples.
Thank you. Right now out in the market with rates where they are and a few more investors moving into leveraged lending, is there any industry-specific investments that have just been, I guess, crazy would be the word for it, on deal terms or pricing? Any industry that is new that's worth avoiding right now?
Well, I'll give my thoughts and then see if John can add to it. We try not to be so tops down in analysis to, for lack of a better word, red line certain industries versus others. Having said that, there are some industries that are quite challenged that we tend not to do a whole lot in. Retail is one of those where we have zero retailers in our book today, and that's a very difficult industry because of the secular trends towards online commerce and competitive margin drivers. Grocery would be another area we're seeing significant oversupply go into it. With every analysis, it's a company analysis and also a capital structure analysis. There are certain technology-related companies that get levered to the hilt out there that are levered and priced, for that matter, to perfection. We often pass on those opportunities as well.
It's difficult to give a generic answer to that. It's really an individual credit-by-credit analysis that comes into play. John, anything you'd add to that?
Well, I guess, Leslie, I bet you have your own list. Auto supply chain, restaurants, gambling, right?
Yes. I would agree on at least a few of those.
Right. Hotels. People that are price takers. I remember somebody came in some years ago, Grier would remember this quite well. The company's called I shouldn't name the company. They might not appreciate it. They came in for a loan, and the company was in the middle of the auto supply chain. A price taker on all of the company's inputs, or virtually all, which were mainly commodities, rubber being a significant component. When the company manufactured its products and turned around to sell to the Big Three, the company discovered it was a price taker on that end, too. That was an easy one to avoid. One of our competitors went into that transaction, what I saw was it was restructured. We see certain areas where historically we've noticed there's, what would I call, price risk, volume risk, fashion risk.
What happens? Do we red line those industries? No. We bear in mind our hard experience in those sectors as we consider whether we might invest. As a result, we do trends that we make investments. Grier, I think it's proper to say in every industry. What we do is, I think, is we bring a different lens to each industry and may demand much lower multiples, much higher fixed charge coverage, more stringent covenants in some industries rather than others. One of the things we do, for example, when we're looking at restaurants. Obviously, we want low multiples of debt plus fixed lease obligations to the earnings ability of any restaurant company. Also we want quick amortization. A lender's best friend is quick amortization, right?
We do things that have enabled us over the years to make loans in industries that maybe other people would consider tricky. That's one reason why we're, in many cases, able to get interest rates that are unavailable to other lenders who maybe don't bring the same expertise that we do to those industries. Is that helpful?
That's very helpful. Thank you. I appreciate you taking my questions this morning.
We are delighted. Thank you.
Thanks, Leslie.
Our next questioner today will be Chris Testa with National Securities Corporation. Please go ahead.
Hi. Good morning, guys. Thanks for taking my question today.
Good morning, Chris. How are you doing?
I'm doing well, thank you. How are you, John?
Good.
Wanted to touch a little bit on what Leslie was asking about the dividend income. NPRC, you guys sold three properties. I'm just curious, how much was the dividend of $11 million relative to the gain on the three of those properties combined?
I'll give that to Grier.
The three properties had total proceeds of $45 million. Our cost basis was $17 million. You're talking about a $28 million gain. We've actually been building up off of prior gains undistributed even before that, Chris, then we have, as well as I mentioned, three other deals that are in the process of closing and then further ones behind that. Since we have about 60 properties, I don't want to say these are on a perfect conveyor belt because it is M&A related, and markets can, of course, change for exits. We've got a pretty good backlog here. Well, book deals as well as a backlog here on a going-forward basis. With nothing incremental to what's already occurred or is already under contract, we feel pretty good about sustaining through the entirety of calendar year 2019, as I've mentioned.
Beyond that, is going to likely depend the magnitude on future exits beyond what's under contract. We're going through an optimization process right now, and we'll be teeing up some additional properties for exit. Generally, after a whole period of, say, three to five years, after which time we've wrung out a lot of the optimization benefits that we underwrote by substantially completing upgrades of the common areas and the individual units. It's time to exit and sell to a buyer that'll pay a premium for those improved properties.
Got it. Okay. Just to be clear, were these properties, are they going to be replenished in the current quarter? Are you under contract basically to buy another three properties with the gain minus the dividend paid out?
We're in a contract with another three properties.
Okay
On top of the ones that I just articulated. What we already have booked gains. We've been banking gains for quite a while. We've exited, I think it's close to 10 properties at this point. Add another three to that and further beyond it. Some properties are, of course, larger than others. We just sold Amberley, for example, which was one of our larger properties. Actually, I should amend it. We have one that already sold since 9/30 to today, we have three under contract. That's actually four properties since quarter end that's not reflected in the historical exit results.
Got it. Okay. When you're talking about potentially more dividends continue in the current quarter and maybe through at least the beginning of 2019 for NPRC up to the PSEC level, most of those are coming from kind of gains on sale. Is that a good way to look at that?
End of 2019 is what we guided towards with.
Okay. End of thing.
Not beginning. End. Throughout the entirety of 2019.
Okay. Through all of 2019. Got it. Are you looking at this, Chris, as just being sort of a net seller? Are you seeing a lot of the markets where you're getting these gains as kind of frothy and maybe you're not going to replenish the assets as quickly as you're selling them? Or are there less opportunities, in your opinion, as to putting the money to work for this?
It's hard to tell, Chris. We don't think it's healthy to have budgets on how much to purchase. If the deal makes sense economically, we'll do it. If we don't see deals, we'll do no new deals. It just kind of happened to be that our exits were about equal to our new originations when we added it up after the fact. Probably more coincidental than anything else. The business of buying garden-style Class B multifamily in various markets across the U.S. is a highly fragmented market. Probably akin to, on the corporate side, lower middle market corporate lending. You don't have the same secular shift boom of wall of money that you have on the corporate credit side.
You still have the normal cyclical money flows that go in almost every asset class this far, but not the secular shift, the double whammy that we see hitting a lot of the corporate credit space that's been concerning to us and many others for a few years. The only thing, there's a lot of off-market deals. There's a lot of non-auction deals. There's a lot of deals where it's a partnership that's ending its fixed life and needs to exit. It's a REIT that needs to meet certain strategic goals. There's all sorts of reasons why folks will need to monetize. There's also a wide range of operational capabilities out there. We feel very good about our roster of operating management teams, and we built up a nice history of property after property and going the distance on a full-cycle basis with many of them.
We continue to add horizontally with new management teams. Then you could say vertically on a repeat basis by doing business with repeat management teams. We like the recession resilience of multifamily Class B. These aren't big-ticket numbers in terms of what's paid on a monthly basis for rent. We like the interest rate resilience because when rates go up, yes, financing costs can also go up. It also makes it more expensive for people to purchase homes than they stay in apartments. This was probably the most resilient asset class within real estate during the last cycle. There's just lots and lots of pluses that makes this a great fit for us, a great fit on a yield and a total return basis. We're going to, for the foreseeable future, continue to deploy capital into this asset class.
Okay. Got it.
Chris, just a couple of things to add.
Sure
These are great questions. I greatly appreciate you honing in on this.
Much of our competition, from what we can see in the real estate arena, buys lower cap rate properties with the intention of doing some fixing up, some refurbishment, but holding the property and working around the edges, if you will, and benefiting from, hopefully, declining interest rates. Of course, I wouldn't be counting on that going forward in the near term. Counting on enhanced demand in trophy markets. We see quite a bit of that. As I know you've discerned, we don't invest in those markets. We try to get to the undiscovered market before other people, and buy B or C, usually C to B, properties, and do a significant value add upgrade. I believe you've noticed that.
In, I believe every single, maybe not every single, but almost every single property, when we've made our purchase, we have done so with a capital expenditure plan that has been well managed by Ted Fowler and Scott Ramsey and Peter Hopkins and Dan Ackerman. We're adding to that group as well. We believe we have a niche, and because of the fragmented nature of this market, we don't see our niche as one that will be readily competed away. Not everybody has, what would I call it? The proclivity or willingness to roll up his or her sleeves and get in there and start changing refrigerators and stoves, and upgrading plumbing and changing signs and landscaping and so on.
I see our strategy as one that takes what one might expect one could get in the real estate market and adds to it a premium return based on value add operations. I hope you won't hold it against me that there's two people at our company, they'll go unnamed for now, who've been doing real estate investing since the 1970s, when maybe half the people on this call were in bassinets or were even younger. Real estate is one of those industries where experience pays significant dividends. I'm very proud of our real estate group, in that, from what I can see, when I benchmark their numbers and their performance, they have outperformed the competition using this value add strategy.
Two quick things to add to that. Amberley that we sold since quarter end, Chris.
Generated proceeds of just over $50 million. Our cost basis was about half that. That one asset alone is another, I think it's $24 million or so of additional gains. That's before you get to the next three pending deals. The other piece you talked about deploying capital and whether things get frothy. In general, I think we might have talked about this a little bit in our last call as well. We did a substantial amount of buying in the Southeast, going back two to five years ago. There's a lot more competition in Florida, in Texas, in the Carolinas, the general Sun Belt, than there was a few years ago. We've moved a lot of our new originations to the Midwest and Mid-Atlantic.
We're happy, actually, we just bought, quite recently, a property that is only about a 20-minute drive from Crystal City, which I guess is the worst kept secret that Amazon's likely to put substantial operations there. We've actually purchased multiple properties in Prince George's County in Maryland, not too far from there. We've had good success in those areas, and we'll continue to explore. It's a low hit rate business, just like corporate credit of a single digit look- to- book ratio, Chris.
Got it. Okay. Just wanted to touch on InterDent as well. I know you guys had assumed control of this position for the Six-thirty-2018 quarter. Prior to that, the maturity was pushed out from August to December of 2017. It was defined as past due. I know you're currently accruing interest, so were you guys accruing interest when this was defined as past due? Since you guys have taken control, just what, if any, changes have you made now that you control the company?
Sure. Well, we're now the controlling shareholder, as you mentioned. What we see there is some very high returning pent-up projects, investments that needed to be made. For example, a modernization and digitization on the X-ray side of things. Very high returning investment. We decided redeploying that capital into the business would generate higher medium to longer-term returns for us, and decided to pick certain tranches as a result, Chris. We think that's a rational decision-making process and rational outcome there. We've had multiple members of the team that live and breathe that company and credit. The dental services space is obviously a highly recurring one by its very nature. We think with some optimization, we're cautiously optimistic about where we're headed.
These are not investments that should take a giant leap of faith to pay off on an individual location-by-location basis when we look at where we're deploying capital for digitization and modernization of X-ray equipment and the like.
Understood. When this was defined as past due prior to you taking control, was this accruing interest during that time period as well?
It was.
Okay. I'm just thinking.
Hey, Chris, to be helpful on that. The rule that we understand is the rule that applies. The first rule is when you get paid cash interest, we record that as income. We don't put things on non-accrual when we get cash interest. We've recorded as interest income all of the cash interest that we receive. When we're looking at pick or any type of deferred interest stream, at that point, we look at collectability. Once we get the cash in our bank account, collectability is no longer the issue. I believe, I'm not speaking out of turn with respect to InterDent, that we've recognized 100% of the cash interest.
Got it. The cash coming in was 100% of what was contractually owed to you, given the interest rates on the loans.
Well, of what we recognized, we did not.
Of what you recognized. Okay.
Of what we recognized. We recognized all of the cash payments made as interest income.
Okay. No, I understand that. I'm just inquiring whether, so it was defined as past due because the cash payments coming in, though, were less than what they were contractually obligated to pay you in full. Is that a correct way to look at InterDent?
Well, there's more than one tranche there.
Hey, John.
Go ahead, Chris.
It's just simply we went past maturity, Chris. Owners don't always hand you the keys immediately. You got to work at it a little bit.
I understand. Okay.
A little harder sometimes to get control. What happened was it went, Chris, I believe, Chris, I'm correct saying, what happened was the maturity of the loan came, the sponsor was hoping for X, Y, and Z to happen, allowed the maturity to occur without paying the loan in full. I believe all cash interest payments, well, excuse me, I believe interest payments were made in cash, and those were recognized, Chris, even though the loan was past maturity. If that's your-
Okay. That makes sense.
Okay.
I just wanted to get a handle on that. It's just a lot of moving parts, appreciate your detail on that.
We were, how would I put this? Appreciative that the sponsor acted in what we felt was a proper and constructive way when the company was unable to refinance, repay the debt, sell the company. We appreciated that.
Got it. Okay.
Now it's our job to make it a great company again.
Right. Just looking at the CLO, the equity cash yields were down pretty significantly on the quarter. Was a lot of that due to the refinances and reset activity during the quarter? Just wondering if you could provide some color on the par value of what was reset or refied during the quarter.
Yeah. Let me help out with that, Chris, because there were a lot of moving parts. When you have. Really, actually comparing the June quarter to September because we reset, I think it was nine deals. It was a record quarter for us for resets in June.
Right.
September was much more muted with only two deals. That's why we really encourage folks to look more at GAAP yield than cash yield because cash moves around not only because there's a return of capital on top of return on capital from the nature of the asset class. You get some volatility short-term that occurs from resets. Especially if people do it in different ways. For example, we like when we do resets if there's Sometimes there's resets where you have a so-called excess collateral par value flush, and basically we get paid a big cash distribution at time zero for certain deals that have performed extremely well. That's what happened in the June quarter to cause a spike in cash yield.
Also, if a deal requires more capital to pay the bankers and lawyers, and to restore some OC tests, potentially. If there's any capital required, rather than investing it, we'd rather use cheap financing for that and have a so-called X note tranche that typically amortizes over 2 years. Great IRR enhancer, but because you got to amortize that X note, it temporarily depresses the cash yield. Moving parts in both directions and across the 2 quarters. You asked about the last quarter. We only reset two deals, so I don't think it was very high par value. Probably no more than $40 million or so, give or take, $40 million, $50 million there.
From a GAAP yield perspective, which really corrects for a lot of this stuff, we were reasonably flat, down about 10 bps from quarter to quarter, which is basically a function of asset spread compression continuing its march and only having two resets to offset it. Comparing it to the current quarter in December, we have already reset three deals, so we're already ahead of our September pace. We have in the queue, we'll see if we get all these done, another six, which would take us to nine total, equaling the pace of June. I don't know if we'll hit nine or not, Chris. We'll see. That's our objective. As always, it's going to be dependent on a lot of factors and our complex analyses on what's going on with our cost of liabilities and the transaction modeling.
We're not going to print a deal for the sake of printing a deal. We're only going to do so if it's an NPV positive event. We generally look for accretive resets at least a 13% discount rate. In many cases, these deals have an imputed IRR that's triple digit for these resets. Those are kind of the ultimate no-brainers, if you will. Hopefully that helps a little bit. I know it's a little bit confusing on the cash side. We encourage folks to look a little bit more at the GAAP side for that reason.
Okay. Great. Those are all my questions. Appreciate your time this morning. Thank you.
Thanks, Chris.
Thank you, Chris. We appreciate your interest. Okay.
This will conclude our question and answer session. I would now like to turn the conference back over to John Barry for any closing remarks.
I have a couple hours of closing remarks, but I don't think anyone's going to be that interested. I'd like to thank everybody for joining our call, and look forward to reconnecting 90 days from now. Thank you all. Bye now.
Thanks, all. Bye.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.